TREASURIES-Yields fall, in line with stocks, on global growth fears
* Europe, China cast pall on global growth, weigh on yields
* Strong U.S. core retail sales to erase gloom
* Despite robust retail sales, spending could slow in 2019-analyst
(Recasts, adds analyst comments, table, byline, updates prices) NEW YORK, Dec 14 (Reuters) – U.S. Treasury yields retreated on Friday, in line with falls in U.S. equities, weighed down by worries about global growth after poor economic numbers out of Europe and China. U.S. long-dated yields slid after rising for four straight sessions. On the week, however, their yields were still higher, with benchmark 10-year notes up nearly 5 basis points. Yields, however, limited their fall following a surge in U.S. core retail sales in November, somewhat easing concerns about a potential downturn in the world’s largest economy. But risk sentiment had already soured with the European and Chinese data, and it was difficult to reverse the trend in yields even with a strong U.S. number, analysts said. Data showed euro zone business ended the year on a weak note, expanding at the slowest pace in over four years as new order growth all but dried up, hurt by trade tensions and violent protests in France, a survey showed. In China, November retail sales grew at the weakest pace since 2003 and industrial output rose the least in nearly three years, underlining risks to the economy. Global stock markets tumbled following the weak European and Chinese data. “The weakness in stocks had something to do with the rise in U.S. Treasury yields,” said Lou Brien, market strategist, at DRW Trading in Chicago. “It seems that relationship is more in tune lately because Treasuries may be sniffing out that stocks may be indicating economic weakness on the horizon,” he added. In midmorning trading, U.S. 10-year note yields fell to 2.896 percent from 2.911 percent late on Thursday. U.S. 30-year bond yields were also down at 3.152 percent from 3.148 percent on Wednesday. On the short end of the curve, U.S. 2-year yields traded modestly lower at 2.749 percent, compared with Thursday’s 2.76 percent. U.S. yields tempered their fall after data showed U.S. retail sales excluding automobiles, gasoline, building materials and food services rose 0.9 percent last month after an upwardly revised 0.7 percent increase in October. Economists polled by Reuters had forecast core retail sales rising 0.4 percent last month. Andrew Hunter, senior U.S. economist at Capital Economics in London, said the boost to real income from lower gasoline prices and the continued strength in the labor market seemed to have provided support to spending growth. But he noted that “with the earlier boost from tax cuts now fading and rising interest rates likely to become an increasing drag, we still expect consumption growth to slow next year.”
December 14 Friday 10:12AM New York / 1512 GMT
Price Current Net Yield % Change
(bps)
Three-month bills 2.3675 2.4142 -0.006 Six-month bills 2.485 2.5509 0.000 Two-year note 100-2/256 2.7455 -0.014 Three-year note 99-174/256 2.7371 -0.022 Five-year note 100-164/256 2.7357 -0.018 Seven-year note 100-96/256 2.8151 -0.015 10-year note 101-248/256 2.8949 -0.016 30-year bond 104-76/256 3.152 -0.010
DOLLAR SWAP SPREADS
Last (bps) Net
Change (bps)
U.S. 2-year dollar swap 14.00 0.25
spread
U.S. 3-year dollar swap 12.00 0.25
spread
U.S. 5-year dollar swap 10.50 0.25
spread
U.S. 10-year dollar swap 3.25 0.00
spread
U.S. 30-year dollar swap -14.75 0.00
spread
(Reporting by Gertrude Chavez-Dreyfuss Editing by Chizu Nomiyama and Jonathan Oatis)
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